Is 2degrees loss-leading on TXTs to the Telecom network?

Forums › 2degrees (including Slingshot, Orcon, Flip, Stuff Fibre, MyRepublic, 2talk and Vocus) › Is 2degrees loss-leading on TXTs to the Telecom network?

willnz

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#39154 10-Aug-2009 15:43

So, it's a relatively well known fact that the current wholesale rate of SMS messages is above 9c. However, 2degrees are offering 9c text messages. It's probably relatively common knowledge (for those that read a certain NBR article before it was pulled) that 2degrees is paying less than 9c per minute for txt's to Vodafone.

However, I don't believe they have a similar deal with Telecom. Are they making a loss on these SMS messages?

simon14

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#244822 10-Aug-2009 16:23

No, they could be charging 5c per text and still not make a loss.

Think about it, as long as the interconnection rate 2d pay Telecom per text terminated on their network is the same rate that Telecom pay 2d, then they aren't going to make a loss (assuming both networks receive about the same amount of texts each way, which will be the case)

Example:

Sue texted her friend who is on Telecom - 2d charge Sue 9c.

Telecom charge 2d 9.33c to terminate the text on their network.

Now Sues friend Mike replies from his Telecom phone to Sues 2d phone - 2D charge Telecom 9.33c to terminate the text on their network.

2D makes 9c profit (overall).

The interconnection rate really makes no difference as long as both parties have the same rate. Interconnection rates only really matter for companies that only ever pay out (never receive any revenue for calls made in or receive less than the outgoing call charged, eg landline to mobile). In this case, the interconnection rate directly impacts the cost of the call, but for Vodafone/Telecom/2D (on their mobile networks) it doesn?t.

That's my opinion anyway.

willnz

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#244824 10-Aug-2009 16:26

I guess that's correct. I was going to say that I doubt 2d would have the same txt volumes inbound as they do out, but I suppose most people would receive a reply to their outbound message anyway so that pretty much balances it out.

Hmm...

sbiddle

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#244876 10-Aug-2009 17:43

willnz: So, it's a relatively well known fact that the current wholesale rate of SMS messages is above 9c.

Isn't Telecom's SMS rate only 3c or 3.5c per SMS? It's Vodafone who were charging 9c

n4

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#244883 10-Aug-2009 18:04

simon14: The interconnection rate really makes no difference as long as both parties have the same rate. Interconnection rates only really matter for companies that only ever pay out (never receive any revenue for calls made in or receive less than the outgoing call charged, eg landline to mobile). In this case, the interconnection rate directly impacts the cost of the call, but for Vodafone/Telecom/2D (on their mobile networks) it doesn?t.

That's my opinion anyway.

This would be true except for the impact of on-net pricing bundles. For example, its well known that people who use on-net text bundles are reluctant to send off-net texts. This would have a significant effect at a network level.

Samsung Note20 Ultra, on 2degrees

simon14

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#244891 10-Aug-2009 18:18

I understand that people who have on net text bundles won't send as many off net texts, but then you would expect not as many off net texts coming back the other way either.

So it still all evens out.

n4

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#244892 10-Aug-2009 18:25

simon14: I understand that people who have on net text bundles won't send as many off net texts, but then you would expect not as many off net texts coming back the other way either.

So it still all evens out.

Not at all! VF have a significantly higher percentage of on-net bundle users than either TNZ or 2degrees. This means that there will be a net inflow of text to VF from the other networks.

Samsung Note20 Ultra, on 2degrees

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bjhoogs

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#244932 10-Aug-2009 19:46

sbiddle:
willnz: So, it's a relatively well known fact that the current wholesale rate of SMS messages is above 9c.

Isn't Telecom's SMS rate only 3c or 3.5c per SMS? It's Vodafone who were charging 9c

This Commerce Commission media release (pdf) suggests 3.5 cents (table top of last page)

willnz

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#244934 10-Aug-2009 19:49

sbiddle: Isn't Telecom's SMS rate only 3c or 3.5c per SMS? It's Vodafone who were charging 9c

bjhoogs: This Commerce Commission media release (pdf) suggests 3.5 cents (table top of last page)

I stand corrected! Thanks for that

simon14

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#244938 10-Aug-2009 20:01

n4:
simon14: I understand that people who have on net text bundles won't send as many off net texts, but then you would expect not as many off net texts coming back the other way either.

So it still all evens out.

Not at all! VF have a significantly higher percentage of on-net bundle users than either TNZ or 2degrees. This means that there will be a net inflow of text to VF from the other networks.

I’m not arguing that Vodafone don’t have more on-net text users…

But I fail to see why that means they will be getting more off-net texts coming through?

Why would they if not as many Vodafone customers are texting out? Doesn’t make sense…